October 09, 2013

Balancing Act: Building for Both Future and Current Users

As companies mature and gain an installed user base, it can become easy to continue forward with incremental and iterative updates that bring features that improve customer satisfaction, but much more challenging to step outside the comfort zone and try something new. Usually, with rare exceptions, to create a new idea and marketplace, it takes new people and a new company with a new goal.

In Silicon Valley, it's more accepted that you will challenge the status quo and take a higher level of risk. Companies' ability to innovate is often measured by how much they spend on research and development, but new products that haven't yet debuted often take attention away from users on the products that are bringing in revenue today. How you manage this balancing act of preparing for a future, while managing the present, can have dramatic impact on your quarterly earnings sheet, and how you're perceived by your customer base.

One of the most well-known quotes bandied about in front offices comes from sports legend Wayne Gretzky, who said, "I skate to where the puck is going to be, not where it has been," which can be boiled down to preparing your company and product line for future years, not for what's already happened. Companies like Google (where I work), Apple, Tesla and others are well known for creating new product lines for future customers and helping convince new audiences that their inventions will have an impact on their lives.

But to create new services best categorized as potential can come as risk if you take your eye off the ball and discard existing customers and their interests. I remember having a discussion with Apple's Ellen Hancock way back in 1997, when she was speaking at Berkeley's Macintosh Users' Group (BMUG). To hear her story, Apple, deep in a mess of trouble at that time, had big plans to revamp their operating system to a next-generation OS called Copland, but hadn't planned any updates to their existing product for more than a year.

Her quote, from my story in the Daily Cal that day: "I said, 'What do we have planned between July 1996 and December 1997?' and they said, 'Nothing...' I said, 'I think that's strange -- we have 25 million users; don't you think they want anything?'"

Somehow, in the excitement over Copland, Apple had asked their 25 million user installed base to wait around and be patient for them to get their act together. Hancock, who no doubt painted her role as a glowing benefactor, pushed the company to make improvements to the aging Mac OS in parallel, bringing value to that installed base, while the company continued efforts on the future product that never did quite make it out the door. (Postscript: Hancock was later demoted by Apple CEO Gil Amelio and had run-ins with Steve Jobs, according to the Wall Street Journal

In my own career, I've seen this push/pull relationship between future product lines and enhancements to existing lines rear up regularly.

In my eight years working in Marketing at BlueArc, a network storage provider, from 2001-09, I often found we would put practically all our engineering resources on one product line instead of another, instead of assigning some product leads to one task and a second group to the other. We would go "all in" on the high end product, launch it, and then turn around and go full bore on the low end product, and then repeat. There was no balance at all - the result of having a scarcity of people available and trying to compete with market heavyweights with significant resources.

In the meantime, while working on the successor to the current generation of hardware, our existing users practically served to annoy us with their problems which we hoped to eliminate once the new new thing came out. There always came a point in the support chain when we would find them an upgrade path to the next generation - if simply to alleviate the problems with the existing one.

Even earlier, when I was at 3Cube from 1999-2001, we had two product lines. One was a Web faxing service that wasn't sexy, but brought in practically all our revenue, especially from broadcast faxing customers. The second was a conference call and early stage Web meeting service. As I highlighted way back in 2006, our meeting platform was the first volley into building an online office suite called OfficeCube. Our small engineering resources were all focused on this future product - to promote the next stage in our growth, even while our existing customers saw innovation in our core service stall. I remember aggressive and frustrating discussions from our business development and sales lead who begged for us to do something to promote the product we were getting our money from, going so far to call our future suite vaporware - which eventually turned out correct.

For smaller companies, especially startups, where revenue has not materialized, a change in course to a future product is well-known as a pivot. It's easier to pivot when you're not walking away from an installed base and needing to have revenue each quarter than it is to tell an established company to change course. Apple's pivot from PC maker to lifestyle device maker took years and incredible effort - and their success is so well-known in part because it's so challenging. Other companies previously well-known for their hardware and software leadership turn, like product managers going the VC route, in companies that live off service and consulting revenue instead.

The topic of branding and marketing is a long one, with libraries full of books on what defines a company's personality and culture. When I see brand extensions from companies I know, I'm always curious what they're trying -- if this new product is a move to evolve their story, a grab at a growing market, a desire for an increased balance sheet, or if they can solve an issue for customers that nobody else can. When you start to tell your own customers that you represent something new now, and that what they've known you as and expected from you is changing, you had better know you're making the right move, and not abandoning what's concrete for something grounded mostly in potential.

Usual Disclosures: I work at Google, which is in a variety of businesses. This isn't intended as a commentary on any of those projects. I don't currently own any stock in Apple or Tesla, but have before and might again if the price is right.